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Last updateTue, 24 Feb 2015 5pm

Alison Padfield considers the recovery of the costs of investigating insurance fraud: current routes and proposed reform

According to the United Kingdom’s Insurance Fraud Bureau, undetected general insurance claims fraud amounts to £2.1bn a year and adds, on average, £50 to the annual costs individual policyholders face (see www.insurancefraudbureau.org). In cases where insurers suspect fraud, they may investigate and then refuse to pay the claim; but what of the costs that they incur in the investigation? The case-law suggests that there are two potential routes to recovery of the costs of investigating a fraudulent claim: the first is a conventional costs order in legal proceedings, and the second is a claim for damages for the tort of deceit.

Additional Info

  • Case(s) Referenced:

    Agapitos & anor v Agnew & ors [2002] EWCA Civ 247

    Banque Financière de la Cité SA v Westgate Insurance Co Ltd [1991] 2 AC 249

    Derry v Peek (1889) LR 14 App Cas 337

    Insurance Corporation of the Channel Islands Ltd v McHugh [1997] LRLR 94

    London Assurance v Clare (1937) 57 Ll L R 254

    Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd & ors [2001] UKHL 1

    Owners of the Ship ‘Ariela’ v Owners and/or Demise Charterers of the Dredger ‘Kamal XXVI’ and the Barge ‘Kamal XXIV’ [2007] EWHC 2434 (Comm) ; [2009] EWHC 177 (Comm); [2009] EWHC 3256 (Comm); [2010] EWHC 2531 (Comm)

    Shah v Ul-Haq & ors [2009] EWCA Civ 542